BBB expels largest bureau over pay-to-play charges

The Better Business Bureau said Tuesday that it expelled a Southern California chapter after an investigation into an apparent pay-to-play scandal.

BBB of the Southland, the nation's largest bureau, lost its right to use the name, logo and trademarks of the famous consumer protection group, according to a statement from the governing Council of Better Business Bureaus, based in Arlington, Va.

Many consumers use BBB rankings as guides to the trustworthiness of thousands of businesses. They also file complaints to the bureaus.

"We hold businesses to high standards for honesty, transparency, fairness and integrity, and we hold ourselves to those same standards," said a statement from Carrie A. Hurt, the national group's president and chief executive officer. "Over a period of more than two years, BBB of the Southland failed to resolve concerns about compliance with several standards required of BBBs, including standards relating to accreditation, reporting on businesses, and handling complaints."

The BBB will continue to serve the Los Angeles-are market online and the estimated 18,000 local businesses can maintain their local accreditation while the council attempts to rebuild the bureau, council officials said.

The governing body investigated after an ABC-TV report in 2010 found that the Los Angeles-based group had granted an A-minus standard to a business named Hamas -- the same name as the Islamic militant group and an A-plus to a white supremacy group.

Both names were for fictional businesses. They were submitted by a blogger who paid hundreds of dollars in memberships, ABC-TV reported.

The same report also cited other business owners, including celebrity chef Wolfgang Puck, as saying they were told they must become members to receive high marks. One of Puck's non-BBB restaurants received an F grade, the report said.

In several cases, small businesses with C grades were bumped up to A grades a day after enrolling, the report said.

In a letter to the governing body dated last Friday, Southland bureau Chairman Jerry Dominguez denied there were any widespread problems and said the chapter had resigned from the organization.

"Our board has endured repeated, unjustified criticism that we haven't been exercising our governance responsibilities as the auditors believe we should," he wrote.

The Los Angeles-area group issued a statement Tuesday that said it simply followed a BBB policy of "only awarding A-plus grades to accredited businesses."

"It is ironic that the BBB accuses us of failing to follow organizational policy on the one hand, and then labels us a `bad apple' when we do," the statement said. "The reality is very simple: the pay-for-play policy was the BBB's, not ours."

"That's simply not true," BBB council spokeswoman Katherine Hutt said. "The service place where I take my car is A-plus and it's not a BBB member."

It is absolutely based on merit...There absolutely is no pay-for-play policy in place," she said.